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EU executive wants higher tobacco taxes

Tobacco taxes across Europe will be raised and definitions of tobacco products tightened if a European Commission proposal adopted today is accepted by EU member states.

The overall effect would be to narrow the differences in the price of tobacco products across Europe, a move that would particularly affect smokers in the EU’s newer member states.

The Commission hopes that its proposal, part of a four-year review of tobacco duties, would also reduce smuggling and accelerate the reduction in cigarette-smoking apparent across Europe. For manufacturers, the proposed rules would also be simpler, the EU executive believes.

The Commission’s primary tool would be to increase the minimum tax that member states must impose on cigarettes. The minimum has two elements: the tax levied as a percentage of a packet’s price, which must translate into a minimum price per 1,000 cigarettes. As a percentage, tax would have to rise from 57% to 63% by 2014 or from €64 per 1,000 cigarettes in the most popular price category to €90 for all categories.

Duties on loose-leaf tobacco would also be hiked to bring them more closely into line with those imposed on cigarettes.

One element of the increases would simply be a revision to take into account inflation over the past four years.

The second element in the plan – to tighten definitions of tobacco products – is also significant, because manufacturers have been able to re-classify products in order to quality for lower taxes.

The combined effect would be to give member states less leeway. The impact could be dramatic in some countries. “In countries like Denmark or Finland, the price increase will be around 6%,” the European tax commissioner, László Kovács, predicted. “In countries like Poland it will be 46%.”

The Commission believes that the hikes could cut tobacco consumption by 10% within five years. In the five-year period between 2002 and 2006, excise duties in the EU rose by 33% on average and cigarette consumption dropped 10%.